US President Donald Trump announced Thursday that he will hit high taxes on imports of steel and aluminum in the United States, at the risk of provoking a trade war with its main trading partners including China.
In the name of national security, and at the risk of triggering retaliatory measures, Donald Trump imposes tariff barriers on US steel imports of up to 25%. The US President also decides 10% tariffs to protect US producers from aluminum imports. In doing so, Donald Trump only keeps a campaign promise: to protect American industries that he considers unfair competition from foreign producers, especially Chinese.
The official and detailed announcement of the barriers should take place only next week. But Donald Trump was keen to unveil the principle of his decision when he received at the White House several business leaders such as John Ferriola, boss of steelmaker Nucor, John Brett of ArcelorMittal USA, and Mike Bless of Century Aluminum . Meanwhile, He He, the Chinese President's economic advisor, Xi Jinping, is also in Washington today for consultations with top officials of the Trump administration. "Our steel and aluminum industries (and many others) have been decimated by decades of unfair trade and bad policies with countries around the world. We must not let our country, our companies and our workers be mistreated. We want a free, fair and intelligent trade! "Proclaimed Donald Trump in a tweet. These statements helped accelerate the fall of Wall Street whose index DJIA lost more than 2% around 20:00 GMT, weighted by the sharp decline of export companies like Boeing, Caterpillar and United Technologies losing more than 3%.
The European Union "will react firmly and proportionally to defend (its) interests," said Thursday evening Jean-Claude Juncker, the President of the European Commission. "We regret very much" this US decision, said the head of the European executive, quoted in a press release, adding that the Commission would present "in the coming days a proposal for countermeasures against the United States, compatible with the rules of the WTO, to rebalance the situation ". "These measures violate the rules of the World Trade Organization (WTO). The European Union must now intervene with the instruments provided for by the WTO in such a case, "Hans Jürgen Kerkhoff, the president of Stahl, an organization responsible for defending the political and economic interests of the German steel industry, said in a statement. "If Europe does not act, our iron and steel industry will pay the bill for US protectionism," warned Stahl's president. Any potential US customs tax on Canadian steel and aluminum exports would be "unacceptable," warned Canada's Minister of International Trade, François-Philippe Champagne.
A risk of sanctions from China in retaliation
It has been nearly a year since the Commerce Department has been studying the impact of steel and aluminum imports on national security under section 232 of the US Trade Act dating back to 1962. These provisions, purporting to protect security of supply in the United States, are rarely used because they can prompt rapid retaliation. Exports of agricultural commodities by the United States could, for example, be sanctioned by China in response to these unilateral US measures.
Chinese steelmakers account for only 2% of US steel imports. But the massive expansion of Chinese steel production in recent years has resulted in a surplus of metal supply in world markets that is driving down prices. The trade barriers erected by Donald Trump are not just scary to areas likely to be hit by retaliatory measures. They are also of concern to steel and aluminum consuming industries, such as automobiles, farm equipment, appliances, and oil drilling equipment. The latter will now have to absorb cost increases. The net effects of White House protections on US employment and industrial production are therefore questionable.
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